Members of the SEC’s Division of Corporation Finance staff discussed recent activities at the AICPA’s National Conference on Current SEC and PCAOB Developments. Division Director Meredith Cross said that 2011 was a busy year for the division. In addition to an ambitious rulemaking agenda required under the Dodd-Frank Act, the staff completed over 5,000 company reviews, issued two staff legal bulletins, released disclosure guidance on reverse mergers and cyber security, and reviewed comments submitted about the SEC’s proposed short-term borrowing rules, she said.

Cross said that the division is still gathering input on the SEC’s proposed rules under the Dodd-Frank Act regarding conflict minerals, mine safety disclosure and the disclosure of payments by resource extraction issuers. Although the SEC was required to promulgate rules to implement these disclosure requirements in April, the staff is still assessing comments to assure that the final rules will keep costs down and foster competition, Cross said. She also noted that the division hopes to address other rules under Dodd-Frank in 2012, including rules on pay equity, pay for performance, hedging and expanding the SEC’s clawback authority.

Deputy Chief Accountant Craig Olinger commented on the division’s staff paper analyzing IFRS in practice. The paper identifies common trends in the annual consolidated financial statements of 183 companies, including both SEC registrants and companies that are not SEC registrants which prepare financial statements in accordance with IFRS. Although the staff found that the statements were generally in compliance with IFRS, there were areas that could be improved, Olinger said.

The staff paper noted that transparency could be enhanced by explaining transactions and including all policies expected to be addressed. Olinger said that issuers did not always use consistent terminology, which he said could be due to translation issues. He also noted that in some cases the use of local guidance was not explained thoroughly. Diversity in the application of IFRS could be a carryover effect of the use of local pre-IFRS guidance, he said.

Deputy Chief Accountant Nili Shah observed that while the staff paper provided helpful information about the use of IFRS, it had some limitations. Only about a quarter of the companies analyzed were SEC registrants and a majority of the companies were European Union companies, so the findings may not apply to non-European countries.

Shah reported that among frequent areas of staff comments on financial statement reviews were loss contingencies. She warned that the staff will look for surprises in loss contingency disclosure such as lawsuits and will question why a loss disclosed in one quarter was not foreshadowed in a previous statement. Issuers should disclose any reasonably possible range of loss in their financial statements, she said. She added that the staff is seeing some improvement in this area, but a number of companies are still not complying.

Shah also addressed the issue of disclosure overload. She reminded preparers that immaterial matters do not require disclosure and that issuers should not include immaterial disclosures just because they fear receiving SEC comments if they do not. She advised preparers to make the disclosure relevant to the investor, and not to the SEC staff members reviewing the statement. The staff will not object to the use of cross-references by the registrant to cut back on redundancy, she said.

Associate Chief Accountants Ryan Milne, Kyle Moffatt, Todd Hardiman and Mark Shannon also spoke at the conference. Given the state of the economy, Shannon said that preparers should take into account the division’s liquidity and capital resources guidance. Milne said that pensions are another issue to pay attention to, because the economy has dealt a double whammy to pensions in the form of low interest rates and declining asset value.

Milne also said that staff reviews have revealed how companies misapply segment disclosure rules in their financial statements. He suggested avoiding boilerplate language, making disclosures specific to the company and providing it enterprise-wide to improve disclosure.

Shah reiterated that the SEC does not like surprise disclosures regarding loss contingencies. She said that even if the amount at stake in litigation is immaterial, it should still be disclosed because it may also have qualitative effects. Even a settlement of an immaterial amount of money should be disclosed to provide a conclusion to the story, she said. Shannon noted that some issuers will try to avoid estimates of loss contingencies, citing the inability to express an estimate with precision. He noted, however, that estimates by definition are not precise and that issuers should not use this excuse not to disclose estimates.

Moffatt discussed disclosures relating to foreign operations for registered companies with subsidiaries outside the U.S. He said that while some subsidiaries employ U.S.-trained accountants, the SEC has also noted instances where the accountants learn about U.S. GAAP on the internet or at an annual eight-hour conference, which does not provide sufficient expertise in the staff’s opinion.

Milne also noted that issuers should disclose how fluctuations in the exchange rate affect financial measures. He said that the negative impacts of exchange rates should be featured with the same prominence as positive impacts in the financial statements.